An Assessment of the Impact of Reducing Implicit and Explicit Energy Subsidies in Iran; Using a Computable General Equilibrium Model Based on a Modified Micro Consistent Matrix

This paper identifies two types of implicit and explicit energy subsidies in Iran. Using a computable general equilibrium model, we analyze the impacts of reducing implicit and explicit energy subsidies. The model is based on a Modified Micro Consistent Matrix of MOE (the Ministry of Energy) which includes implicit subsidies. The model consists of 36 commodity groups and 18 economic activities. Our findings suggest that overall economic activity and consumer welfare will be reduced following the reduction of energy subsidies. Energy exports would increase and nonenergy exports decline. Economic activity will decline across all sectors except for upstream energy activities. Domestic energy demand by households and producers would decline as well.